Energy bill package will cost £60bn in first six months, says chancellor Kwasi Kwarteng
Kwasi Kwarteng has unveiled the biggest raft of tax cuts for half a century, said by critics to benefit the wealthy and big business, in a mini-Budget slated by fiscal experts as unsustainable.
In a scathing assessment, the Institute of Fiscal Studies said the chancellor was “betting the house” by putting government debt on an “unsustainable rising path”.
The pound plummeted to a 37-year low after Mr Kwarteng unveiled his plan, aimed at raising falling living standards by boosting growth.
Using more than £70 billion of extra borrowing, he scrapped the top rate of income tax for the highest earners.
He also cut stamp duty for homebuyers and brought forward to April a cut to the basic rate of income tax, to 19p in the pound, as part of tax cuts costing up to £45 billion annually.
Mr Kwarteng confirmed plans to axe the cap on bankers’ bonuses while adding restrictions to the welfare system.
But the price of government borrowing soared even higher, amid fears the package had sent UK markets into meltdown.
TUC leader Frances O’Grady said: “This budget is Robin Hood in reverse.”
Rachel Reeves, the shadow chancellor, said it was “a plan to reward the already wealthy”.
Road and fossil-fuel projects dominate plan, say environmentalists
The mini-Budget’s plans for road-building and using fossil fuels undermine government climate targets and wreck environmental protections, says Friends of the Earth.
Mike Childs, head of science, policy and research, said: “Almost two-thirds of the infrastructure priorities announced today as part of the Chancellor’s Growth Plan are road schemes, along with five North Sea oil and gas developments.
“Surely the government can no longer pretend that its plans are consistent with the UK’s legal obligation to cut climate-changing carbon emissions? “It’s good that there a few offshore wind projects in the mix – though a relatively small number – but alongside these there should have been a long list of onshore wind sites and solar farms because they are quick to build and an incredibly cheap source of energy. “What’s also missing from the growth plan is any assessment of its climate impacts.
“Instead, it works as a blueprint for ripping up important environmental safeguards and pursuing economic growth at any cost, which is the last thing we need faced with a climate and ecological crisis that is already devastating the planet.”
Jane Dalton23 September 2022 17:15
Onshore wind farm ban scrapped
Environmentalists and the renewable industry chiefs have tentatively welcomed the plan to end a de facto ban on onshore windfarms in England, which could in theory mean cheaper electricity generation. Adam Forrest reports:
Onshore wind farm ban scrapped in mini-Budget
Campaigners welcome move – but condemn fossil fuel push and plan to weaken environmental protections
Jane Dalton23 September 2022 16:50
Dividend tax cut good for businesses, savers and pensioners, says expert
A tax expert has described the mini-budget as “unbelievable, staggering and incredible”.
Nimesh Shah, chief executive at leading tax and advisory firm Blick Rothenberg, said it contained “tax-cutting measures not seen in a generation”.
“Kwarteng was bold in his assertions that he wanted a simpler, more dynamic and fairer tax system, and you could say he backed that up with his box of tax-cutting tricks,” said Mr Shah.
As well as the cut to corporation tax, Mr Shah said the 6.85 per cent cut to the highest rate of dividend tax was good news for business owners and the self-employed receiving dividends, along with savers and pensioners with investment portfolios.
Jane Dalton23 September 2022 16:25
National Insurance rises while corporation tax cut
National Insurance has gradually risen over the past 40 years, figures show. The chancellor has cancelled the latest planned rise, which had been due to fund social care.
Meanwhile, corporation tax has been reduced over the past 12 years, since the Conservatives came back into power:
Jane Dalton23 September 2022 16:12
Treasury minister claims pound boosted – as it hits 37-year low
A Treasury minister was left red-faced after claiming the tax-slashing mini-Budget had pushed up the value of the pound – moments before it plunged to a 37-year low:
Treasury minister claims mini-Budget has boosted pound – as it hits 37-year low
Chris Philp red-faced after saying ‘Great to see sterling strengthening on the back of the new UK Growth Plan’
Jane Dalton23 September 2022 16:05
Lack of help for unpaid carers ‘will mean bigger costs for society later’
A charity representing unpaid carers condemned the lack of support in the chancellor’s speech for carers who are unable to work because of their caring commitments.
Emily Holzhausen of Carers UK said: “The measures that we have been calling for to support unpaid carers more with the current cost of living crisis are completely missing, leaving millions of carers facing unprecedented financial hardship this autumn and over winter across the UK.
“Many carers are telling us they are unable to pay essential bills, they are cutting back on food and heating and remain desperately worried about this winter, which will undoubtedly mean bigger costs for government and society further down the line.
“Carer’s Allowance and carers’ means-tested benefits need to be immediately raised in line with inflation this autumn.”
Jane Dalton23 September 2022 15:50
Borrowing to reach its third-highest peak since war, says expert
IFS director Paul Johnson added: “Mr Kwarteng has shown himself willing to gamble with fiscal sustainability in order to push through these huge tax cuts.
“He is willing to shrug off the risks of inflation, and to invite significantly higher interest rates. Injecting demand into this high-inflation economy leaves the government pulling in the exact opposite direction to the Bank of England, who are likely to raise rates in response.
“Early signs are that the markets – who will have to lend the money required to plug the gap in the government’s fiscal plans – aren’t impressed. This is worrying.
“Government borrowing is set on an upward path. It will reach its third-highest peak since the war, and remain at well over £100 billion, even once the energy support package is withdrawn.
“And we heard nothing on public spending. It seems almost inconceivable that plans made last year, when inflation was expected to peak around 3%, will not need topping up at some point, unless the government is willing to allow a (further) deterioration in the range and quality of public services.
“Presumably this Government would borrow for that also. Mr Kwarteng is not just gambling on a new strategy, he is betting the house.”
Jane Dalton23 September 2022 15:35
Kwarteng betting the house, says IFS, ‘with no effort to make finances add up’
The Institute for Fiscal Studies has warned that Kwasi Kwarteng is “betting the house” with his vast tax cuts, putting government debt on an “unsustainable rising path”.
Director Paul Johnson accused him of outlining the biggest package of tax cuts in 50 years “without even a semblance of an effort to make the public finance numbers add up”.
“Instead, the plan seems to be to borrow large sums at increasingly expensive rates, put government debt on an unsustainable rising path, and hope that we get better growth.
“This marks such a dramatic change in the direction of economic policy-making that some of the longer-serving cabinet ministers might be worried about getting whiplash.”
Jane Dalton23 September 2022 15:30
Growth plan will rebuild economy, claims Truss
Liz Truss said the government’s economic vision would set out “how we are going to rebuild our economy and deliver for the British people”.
She tweeted: “Growth is key to delivering more jobs, higher pay and more money to fund public services, like schools and the NHS.”
But one critic said the only growth would be that of food banks and poverty.
Jane Dalton23 September 2022 15:14
Full story: Sturgeon reaction to mini-Budget
The super wealthy are “laughing all the way to the actual bank”, Scotland’s first minister has said after the chancellor unveiled plans he said would drive economic growth.
Read more about her reaction here:
Sturgeon: Super wealthy ‘laughing all the way to the bank’ after mini-budget
Chancellor Kwasi Kwarteng announced a so-called mini-budget on Friday.
Zoe Tidman23 September 2022 15:00